Wednesday, January 28, 2009

I love old poetry like those from Tennyson or Pope, and I despise modern poetry. Kudos to Jake Bodin, a modern poet who communicates important ideas through beauty, the ultimate purpose of poetry!

Here is Jake Bodin's Animal Man. It is long, but worth the time.

Circle and spin,

moon round the earth, earth round the sun,the sun to another, another to one.From the premier gyration, when the first circle began,has anything at all revolved around man?

Or was his deified lot made trivial by Copernicus?

The bodies circle and spin while time runs straight.Is time just the length of the circle unwound?Is anywhere save for the end of timethe beginning of the circle found?

Is the circumference of this lifeand the area it contains,lonely abstract circles in space,or equally vital links of a chain?

The meaning of his lot is all man desires to know.Yet a question of meaning is a question ill posed.

For an answer exists, an answer sufficing.Yet so does another, and another and another…

Our discontents arise not from the failure of logic to elucidate,but rather the difficulty of deciding which answer to eliminate.

We are ships with sails aplenty,yet no rudder to steer. The winds they blow in circles like the thoughts of the sailor.

So rather than leaving waters far as unknown,we conjure tales in waters near.

This you read though, this is no tale.This is a map of waters sailed.The rhyme is of no need, nor the tale need told.The rhyme is but to beautify a sailor’s tale of old.

The story of what we are,is a story of how we began.Behold these words of rhyme:The tale of Animal Man.

I.

To what divine purpose or willSets the sheep to graze, the wolf to kill?Destines the proud eagle to majestic solitude?Fuels the perpetual lion/hyena feud?

Through the same reed plays the opus of man.All life is sown from the same powerful strand.

One force to survive, one force to breed,they are the maker of our story, the writer of our history.Two forces--one artist--of anatomy and disposition;fighting the world outside with armies of the universe within.I urge you the reader, just consider this:Nature is not what should be, but rather about what is.

Sentence the deranged and perverted to shame.Burden their thoughts, their soul with blame.For murders of anger and passions uncontrolled;for sins of the flesh may their souls be sold.Compare them to you and your virtue refined,then all nature must be judged by the same fine line.

What is the difference between a whoreand the other multiple-partner carnivores?Was it not inherit in nature’s design,for the purpose of preserving the family line;for the woman to desire numerous men,so one man sterile cannot set her genes to an end?

Defend the whore? The reader proclaims!Use sources of lust and passion to justify her ways?By this we can forgive every murder and rape,every wrong deed executed following urges innate!But I know of no grounds to crown or crucify.I do not defend or judge. I only explain why.

With no system to judge in judging I refrain,but judging and punishing are not the same.To judge is to lift the throne of vanity up high.To punish is to care for others, to prevent future crime.Left to themselves, some are violent inclined.The punishment is to keep Animal Man from hurting his kind.

II.

Proudly we sit, on the throne of experiments and equations.Mocking forms stuck at lower elevations.To the moon goes man, and beyond soon.Any place of entry nature has refused;we march, we conquer, nature has no defense;for the energy of ingenuity and the congruency of common sense.

So easy it is, when we have conquered distance,squeezed the length of miles into a minute,to arrive at this absurd, universal truth:That creatures of earth were made for our use.That the cat who chases its tail in futility,does so for our amusement, solely for our utility.

How shocked he would be if it were known,that if man had a tail he would chase his own.Lacking a tail, an analogy may be made,to the “tales” man composes to fend off dismay.To make a day worthwhile and life a blessing,man assigns a meaning, a story, a purpose to everything.

Does man fall into despondency when tragedy ensues?No, man finds in calamity a lesson to use.Does man feel helpless at the approach of his death?No, he simply assumes after this world there is still one left.Does man grow weary waiting for God to orate?No, he says it must be God works in a mysterious way.

Imagination is a brilliant filter of misfortune.When the wheels of tragedy are set into motion,never will it outrun man’s magic potion,the magic of believing any farcical notion.Nature’s engineering feat that exceeds all else,is the ability of man to deceive himself.

Give thanks to the heavens for putting imagination in place.Otherwise man would learn to spite his meaningless days.As man takes grapes, takes it to make wine,a thought can turn earth absurd to earth sublime.Does man even care his beliefs are sophistry alone?

No more than the cat cares the tail is its own.

III.

As the fish, to ignorant to conceive of dry land,the geniuses buckle in defining Animal Man.Is a brief moment’s movement, a movement of mine,if by conscious contemplation in movement I decide?Or the instinct to blink before a particle hits the eye,that proceeds deliberation, was it an action of mine?

The instinct or the deliberate? What constitutes that which is me?Or am I perhaps not a whole, but two separate entities?Or many more? What is the whole?What is the whole if parts act solely on their own?If my cells so loyal turned to cancer unrestrained,is it cancer that will kill me, or am I to blame?

If the reflex to kick at the tap of the knee,were outlawed universally by sacrosanct decree,and I kicked, who would stand trial; who for mercy should beg?Animal Man whole? Or the nerves in my leg?If sentence was given, a sentence of death,the mind is tortured for the actions of the leg?

Consciousness is only the deceiving face of being,the only part of self-reflection able to be seen.So much more, alas, the majority rests inside,part directed by nerves, part by the mind clandestine.They handle the parts of life most dear and felt:Animal Man pushes his soul away from himself.

Man claims the irresistible impulse of falling in love,is rational to playwriting gods above.Yet he fooled himself! Love cannot be a rational choice.Love is a prison rationality would avoid.But love must exist, for the offspring rationality must fall,and so the hidden irrationality is rational after all!

Lastly, for who do I pray, what really am I,when I am a voyage of a thousand guides?On the whole I am my story, in part what I feel,yet I only know the latter, and never grasp the real.And the story saddest among all the rest,is that Animal Man has never met himself.

IV.

Classes the classes! the inequalities persist!Is status cloaked by manner or displayed by dress?By effort? By chance? Is the difference justified?What trait ensures one will serve he who dines?And how does the politics elected to correct inequality,only results in profits for the elected party?

What are we to do? What can be done?Is every man different, or is every man one?It is not our society has missed the value true:We do not value the man, but rather what he can do.And so if man is paid according to talent displayed,the value of a intrinsic man is not captured in his wage.

So where is the value of man, by what is his measure?Perhaps by religious principles one can deem man the better?Then the measures would be infinite, no ranking is feasible,when beliefs scatter in the head like the earth scatters with people.Besides, the sum of man’s morals always add to zero.One-half man the villain, one-half man the hero.

If a man is talented, his talent will be bought,but though inequality is widened, it is solely man’s fault.The poor reproach the gods for poverty dateless,regardless the gods have never doled wages.It is man’s preference that poverty, inequality persist,as man walks the earth, naming all that is his.

When the final roll is called and all men are dead,will the meat of the fat be given to the underfed?When destiny greets man at his most feared stage,at the stage of death, will the greeter compensate?Does fate ensure at last that all men are equal,equally rotten corpse of no life, sight, or feel?

Is the imbalance of fortune really a terrible realization?Is the panhandler made worse by a king’s coronation?Whitman might say the value of living is the power of your story.That a novel can bestow the poorest of men with earth’s greatest glory.Life would feel ever so futile, were story after story to repeat.Injustice, with all its harms, ensures Animal Man’s story is unique.

V.

Children pull their hair in search of gray roots,then when gray shows they long for youth.Remembrance is the deep moaning cello string.The precious pasts rides patiently on future’s wings.Yesterday held so dear, tomorrow so faithful.Yesterday, tomorrow enter. Today is never welcome.

Memories are life’s chronicle in order of emotion,some ready to be relived at the slightest of notion.Other insignificant moments are quickly set aside,forgotten, sacrificed, for the critical to reside.If the inconsequential are cast into the mind’s abyss,can we really then say this half of life was lived?

If not, then half of what we are is not our half to claim.If not, the book called life must then be renamed.Changed from a meticulous recording of history,to a summary highlighted by the limits of memory.Every day changed by new moments lived.Every day Animal Man changes what he is.

The present is a trudge towards the top of a mount.One side clearly seen, one blocked by the ground.At the present, yesterday is a chaotic order of events,in the grand scheme, happenings with no consequence.Today does not justify the disagreeable days of past.But his unshakable faith assures him tomorrow will at last.

The future is a chest of treasures to be bestowed,compensations of blessings to coat memory’s sores.Promises, promises of fortunes profuse,a dollar for each inconvenience, a million for each abuse.Future promises in extravagance, doles the highest wage.And why not? The future, lying ahead, never has to pay.

VI.

The arts are man’s; no other species’ to perform.In arts the world is imitated, transformed to adorn.In taking the earth so vile and unjust--a sphere that bundles a birth with a curse--and casting this play in a more suitable setting,the absurd becomes necessary, a curse becomes a blessing.

Before language, music must have been sung,for nature seems to bundle a song with a lung.From a baby cub’s cry to her mother’s roar,pitch alone is a language for this expressive carnivore.In screams of danger and calls for breeding,nature found in music an expression of feelings.

Few Americans can discern a Frenchmen’s conversation.Borders divide countries, but language divides nations.Yet a Frenchwoman knows an American baby’s bawl,and French symphonies tell stories throughout America’s halls.Before language was made so intricate and diverse,this primordial tongue of emotion was the language used first.

Though birds may sing they do not create;when man composes a new world is made.The world is but a story that cannot be revised,except in the variform siblings the arts comprise.The arts are a cult with the greatest of persuasion,inciting with frail promises and the most clever of puns.

Animal Man stands like sheep waiting for his shepherd;he says, “ The grass here is good, but there must be grass better;whoever leads must knows where it lies;this leader’s trail, his wisdom, must be canonized.”Walking in faith sets Animal Man into a lull,and dying to learn the trail was a circle.

When Animal Man cannot discern the purpose of his place,he will cast away logic and with faith replace.Animal Man will worship gods benevolent or wicked,anything making this world seem different than it is.The arts are like gods, they are different points of view,to bury realities deep, and replace with truths new.

Whenever I try to understand the behavior of politicians, I always use the self-interest motivation, and assume every action is taken to make the public believe they need the politician to protect them.

Consider tuition freezes. The Oklahoma legislature sometimes allows OSU to change tuition as it likes, and sometimes forces OSU to keep tuition lower than it likes. One could interpret this as government's attempt to help keep prices low, or....

Consider that the state government does want universities to be an impressive place, a cathedral of the modern age. They want opulent landscape and impressive buildings, and of course, an imminent faculty. They know this costs money, but they don't want to appear to be the ones spending it.

So what politicians do is force universities to keep tuition low for a number of years, giving the public the impression that if it wasn't for them, tuition would be higher (universities just circumvent the tuition freezes by adding on more fees, like the ridiculous assessment fee that takes dollars bills and flushes them down the tiolet). To keep the university competitive in terms of buildings and faculty, they must be allowed to raise tuition at some point (fees are only an imperfect substitute for tuition). But the politicians want it to be "the university" who raises tuition, not them, so the politicians publicly bestow the university with the power to govern itself.

Of course, the university has to raise tuition substantially because it has been constrained by the government for so long. Then after the big tuition hikes, when no more hikes are really needed, politicians enter to save the day by taking the reins and imposes tuition freezes.

Monday, January 26, 2009

THE PRICE OF NOTHINGby F. Bailey Norwood(mostly finished, still working on typos)

The Price of Everything, by economist Russell Roberts, is a teaching novel, an attempt to entertain while you educate. It is a magnificent description of the role price plays in society; a role crucial for our well-being, a role that is poorly understood. Sterilized water is also crucial for our well-being. In the past, we understood it poorly. Our ancestors drank beer instead of water throughout the day because they knew beer was safer. If they had understood that it was the boiling process of brewing that made the water safe, they could have obtained safe water without going to the high cost of brewing, without staying tipsy all day. In similar respect, Dr. Roberts hopes to understand our understanding of prices, so that we can utilize prices to better serve our needs, much as today we consume safe water at a ridiculously low cost.

The price of any good reflects a wealth of information: an amount of knowledge no human or committee could possibly possess. While I agree with Dr. Roberts, as with many concepts, the information contained in prices will change starkly when viewing from a different perspective. From this different perspective, the price of everything is the price of nothing. Allow me to explain.

ENERGY

Our world spins off the extraction of nonrenewable resources. The profuse layers of coal beneath our feet heat our home, and the coal is removed from machines that consume oil from far-off lands with an alien culture and value system. These subterrian jewels provide energy, and that energy helps computers run and ambulances bolt. There are only so many of these dirty jewels, and while mankind will someday develop alternatives, the date of that event is kept secret by Providence. Thus, we have to be careful how much we use today, if we are to ensure our children will have some reserves to fuel their ambitions. These nonrenewable energy sources are rationed by price. Higher prices force us to conserve and lower prices say its okay to consume. Energy is an essential input into every good and service, and is built into their prices. Higher fuel prices imply higher transportation prices which imply higher Wal-Mart prices -- teling us that we must conserve more, back away from Wal-Mart, and be happy with what we have. Discoveries of new oil deposits allow us to consume more today without sacrificing our children's reserves, and the lower oil prices imply lower Wal-Mart prices, and that is how we know to consume more. The price of oil is the signal telling us how many toys we should consume today, in order that our descendants will also have these same toys.

If the price of everything depends on the price of energy, and if the price of energy is not set correctly, neither is any other good set correctly. Ask yourself: how could the energy price be set correctly? When will alternative energies be developed? We do not know. How many more oil deposits will be found? We do not know. How reliable and useful is shale oil? We don't know. Markets ramble about, attempting a guess at these questions, but it is just a guess. The guess is destined to be wrong, but the direction of the bias and the magnitude is unknown.

As energy prices are most certainly incorrectly set, so are all other prices. Prices are built on a shaky foundation of crude predictions about crude oil, and other predictions which are either wrong or extremely wrong. As our crystal ball into the future only shows a second crystal ball, the price of everything is almost certainly, despite its benevolent intention, the price of nothing.

But then, the price of energy does mean something to each individual, though not the same for each individual. I knew whether I was willing to drive into Oklahoma City on September 20, 2007 when the price of gas was over $3.00 per gallon. I know whether I am willing to drive tomorrow, at whatever price it will be tomorrow. My family will make some decision about the next car we purchase, and it will take into account gas prices.

Famed oilman T. Boone Pickens also knows what the price of oil means to him. It probably doesn't impact his driving, since he has a private jet. Billionare Pickens does own oil fields though, and knows where more oil may lie. Mr. Pickens also invests in wind energy, and knows where more wind can be found. As oil prices change, he will know what to do with his investments. He may feel uncertain, but he will make a decision.

Society as a whole, if such thing exists, is incapable of deciphering the signal sent by oil, natural gas, and coal prices. Each individual within that society does know what to do with energy prices though. Prices are not a public message; prices whisper something different into each person's ear.

PRICE ANALYIS

If something can be studied, it exists. If price has any tenable meaning, it can be studied by economists. Our world consists of nominal prices, but to study them across region and time requires that we convert them to real prices. That picture of George Washington on a green bill is much less persuasive today than in past years. The journey from nominal to real prices requires the use of price indices, like the consumer price index. Wade Brosen is an esteemed economist at Oklahoma State University. I once asked Wade: when one studies price relationships, such as how beef prices behave in relation to corn prices, what price index should be used? He replied that your choice of price indice is important, because the analysis results are not robust to changes in index, but it is not at all clear which indice one should use.

Despite the intelligient economists and vast amounts of money reserved for creating price indices, they are rough approximations of real prices - very rough. As economists continue to deify price, never is price -- real price -- ever seen. The skeptic must wonder, then, if the price of everything is a thing at all.

The Christian God has not been directly seen by his people for thousands of years. Yet his followers are no less doubtful than those who did cast their eyes on that which is alpha and omega. The reason is that his followers do in fact "see" God in their own way, whether it be a sequence of events interpreted as a sign or a surge or emotion as service. Tis the same for price. People claim to have seen it, but they can never show it to you.

GROSS DOMESTIC PRODUCT

Economics is a study of wealth. The first economics book, published in 1776, is titled The Wealth of Nations. Naturally, economists like to measure wealth, and we do so using Gross Domnestic Product (GDP). The GDP calculation is simple: take every good and service consumed, multiply it by its price, and sum this product over all other consumer goods and services. Price, here, ensures we make a fair comparison. A car is more valuable than a candy bar, so one car is not added to one candy bar for a wealth of two. Instead, the price of the car is added to the price of the candy bar, for a wealth much different and more appropriate measure of wealth. If price fails in the GDP calculation, the GDP measure fails. Price does indeed fail to reflect value.

The government makes many purchases that enter into the GDP calculation. The government also makes many purchases that have no value to society. The Iraq War, as of 2008, provides no value to Americans, and much loss to some Americans, even their lives. Yet every bullet and every bomb counts as GDP; it counts an amount equal to its cost. Surely, that price does not always indicate value; it overestimates value. The total cost of the Iraq War may exceed $1 trillion. The exact cost is difficult to estimate and relies on controversial assumptions. Yet whether it is $1 billion or $1 trillion, the value of the war is much less.

In other instances price underestimates value. No one purchases a good for which they value less than its price. Otherwise, why would they make the purchase? In these cases, price underestimates true value. Approximately one-third of all goods and services are purchased by the government, and are vulnerable to being over valued by price, and two-thirds are purchased by private citizens, and will be under estimated by price. Given there is no reason to suspect the over- and under-predictions would cancel each other out, GDP is not a measure of total wealth.

Yet GDP remains a fixture for news stories and is tracked by economists like the surgeon tracks heart rates. The measure fails for the simple reason that there is no single heartbeat for society at large. Our hearts beat at our own unique time and place. No surgeon would propose using one heart monitor for two people. No measure of wealth exists for you and I collectively. Our hearts beat separately nevertheless, and we take delight in the thrill of our toys and the security of our financial instruments. We measure wealth because we are interested in wealth. Since we never know whether our measurements are correct or incorrect, our subjective delight in summing the numbers is the only reason we should calculate GDP.

NONMARKET VALUATION

Nonmarket valuation is the economic field of measuring the value individuals place on goods for which no price can be directly observed. When the Exxon oil tanker dumped gigantic volumes of oil into the Prince William Sound, the courts were interested in knowing the price U.S. citizens were willing to pay to have this oil cleaned. One can check the price of milk at the grocery store, but no such price tag exists for this good. Instead, the price must be measured through methods such as mail, phone, and in-person surveys of individuals across the country.

Many economists spend their careers learning how such survey questions should be asked, and the one lesson that keeps repeating is that any change in the survey question or setting in which the question is asked changes the answer. If a pretty girl administers the survey, the answer changes. If the person is asked their age before the price they are willing to pay, the answer changes. These survey administrators will tell you, in secret, that it often feels like there is no real "price" to measure at all.

The Heisenberg uncertainty principle in physics states that the mere fact of measuring the position of a particle makes the momentum of the particle harder to measure. The measurement alters the state of the object being measured, and the same thing happens with people. When you ask a subject the value they place on a good, you simultaneously change the value they place on the good, and every variation on how you ask the question changes the value in a different way. Indeed, it has even been shown that merely asking someone whether they would consider purchasing a good increases their propensity to purchase the good. Listen carefully, because that was a profound point: asking people about their preferences changes their preferences!

So what is this value if it is so susceptible to changes in context? How can one measure value when the measurement changes the value?

The answer is that you don't. Ask a survey question and one will receive a survey answer. Yet there is no survey question about price that reveals information about the price. Of course, a price does exist for the person. If the price of milk reaches $4.00 per gallon, Mary may discontinue its consumption while John may simply reduce consumption by one-half. Both Mary and John have a maximum price, and they probably know what it is. They just can't tell you what it is.

DENOUEMENT

In a competitive economy, prices contain a wealth of information; they benevolently help us determine what we should and should not do. This is often noted by economists. Indeed, it is their mantra.

What is not often noted is the fact that this information is not written in a universal language, and that attempts to speak of prices negotiated by other individuals destroys that information prices contain. A single price reflects the property, expectations, and desires of millions of individuals, and that single price means something different to each face among these millions. It is this facet of price that is so wonderous and unintuitive.

Price is a necessarily personal number. It cannot be spoken of in news stories clearly or deciphered intelligently in magazines. It degrades from an institution to a blot of ink when it enters an econometric equation. Communist and socialist systems have failed heroically in every documented attempt manipulate prices. This failure is often attributed to the fact that governments do not have the competence or information to adequately set prices. The failure is more than this though. The problem is not just that a few individuals cannot set the many prices for the many people, but that when price is assumed to convey the same information to each person, that number ceases to be a price at all.

I believe that air is real matter, just like at rock, but I know it is to elusive to catch and hold in my hand. Similarly, I know that prices are the most important numbers for a societies with a penchant to truck and barter. Yet I have no desire to control the prices negotiated by others. This includes the rent between tenants and landlords, as well as the interest rate negotiated between banks. The inability of me to see, conceive, or understand the prices set by others implies that it is none of my business. Thus, I let prices be. Unless you are able to grasp the air and hold a unique collection of air molecules in your hand, you have no more business than I controlling prices.

For the buyer and seller, the price of everything is, well, the price of everything. To the outsider, the price of everything is the price of nothing.

Friday, January 23, 2009

A recent study shows that Americans live three years longer than they did decades before, and five months of this increase in life expectancy is due to cleaner air.

Over at Cafe Hayek, a reader with much wit comments...

Of course we'll have no way of knowing how much the life expectancy would have increased without the "expense" i.e. the redirecting of resources that would otherwise have been invested and ultimately resulting in more comfortable and healthier lives for everyone.

This accounts for 5 months out of three years. where did the other 2 years and seven months come from? Who gets the credit for that? The short answer is from the very same things that result in pollution.

Don't think so? then how did that kidney get rushed from California to New York overnight?

I sent the article below to the Reason Foundation, a libertarian think-tank. I promise you, they will be mocking this for decades.

Children moving back to Tar Creek

by: OMER GILLHAM World Staff WriterThursday, January 22, 20091/22/2009 2:44:57 AMPICHER — Federal funds are being used to move families with children into a Superfund site at the same time the federal government is spending millions of dollars to move families out of harm's way.

The Tar Creek area, which is on the Environmental Protection Agency's Superfund list, is in Ottawa County in far northeastern Oklahoma. The federal government is spending an estimated $60 million to voluntarily relocate families and businesses that are threatened by undermining and lead contamination.

As first reported Wednesday on tulsaworld.com, Dr. Mark Osborn, chairman of the Lead-Impacted Communities Relocation Assistance Trust, said the Picher Housing Authority appears to be refilling its housing units as fast as the relocation committee is emptying them.

"It is exasperating to think that one agency of the federal government would spend more than $60 million to buy out the residents of a community that had been found to be unsafe for habitation, while another agency of the federal government (the Department of Housing and Urban Development) would purposely move other families into the very same community," Osborn said.

"Apparently, as soon as we pay to relocate the residents of Picher public housing, HUD moves families into the vacant units, including families with children under 6 years old we have worked so hard to protect. I would hope that it would be inconceivable, but apparently it is not."

The federal buyout is similar to a state-sponsored relocation project that voluntarily removed 52 families with young children in 2005.

With the federal buyout past the halfway point, the Picher Housing Authority has recently rented several low-income units to individuals or families with children, said John Sparkman, executive director of the authority.

Sparkman said 15 of the children are ages 1 to 15. Lead poisoning is known to affect children 6 years old and younger.

"We are a government housing program, and we just can't turn renters away," Sparkman said. "We are working on a plan to close down the units, but it will take awhile to do that. You just can't shut this down lickety-split like that."

Sparkman is a long-time advocate of removing families from the Tar Creek Superfund site. He served on the relocation committee that removed the families with small children in 2005.

In the past, he has not flinched at taking action to close down housing units that were threatened by undermining. In 2006, Sparkman and the housing board acted quickly to close 24 units because they were built atop mines with a potential for collapse. The 54 remaining units are not undermined, Sparkman said.

Danny Finnerty, spokesman for U.S. Sen. Jim Inhofe, R-Okla., said Sparkman is following HUD guidelines to offer safe housing as long as the need is apparent and until the units are shut down.

"According to HUD, he is obligated to rent to families and individuals," Finnerty said. "You have to understand that the units are not undermined nor are they in immediate danger."

When asked about the children being moved into Tar Creek, Finnerty said: "This is a temporary situation, and these units are not undermined."

Sparkman said: "The safety of the children has always been a priority for me, and this is no different. We are educating the families about the dangers of lead contamination."

The new renters won't qualify for the buyout program, since the deadline for applying has passed, Sparkman said.

He could not give a definite timeline for shutting down the housing units. However, the federal buyout is expected to end in December, and he now has a more firm deadline to submit to HUD, he said.

Until the housing units are shut down, they are being used to help low-income families and families affected by natural disasters, he said.

"These units are still serving a useful purpose," Sparkman said. "We are still housing some of the May tornado victims (from Picher). There are also people from the Miami (Okla.) flood, too."

A recent Tulsa World editorial titled Odd Team (Jan 22, 2009) described the new partnership between T. Boone Pickens and Robert F. Kennedy Jr. as a collaboration to educate Americans on the dangers of sending money to foreign nations for their oil, because "oil-rich Middle East nations are using those billions in U.S. dollars to build new schools, roads, and airports while the infrastructure in the U.S. is crumbing."

The editorial makes it seem that when we purchase oil from the Middle East we are "giving away" that wealth. That, however, is not the case. Whenever the U.S. uses dollar bills to purchase foreign exports, those dollar bills come back to the U.S. in the form of U.S. exports. We give Saudi Arabia dollar bills for oil. What can a Saudi prince do with dollar bills except spend them in the U.S.? This is important, so I repeat: every dollar spent on importing foreign goods has to come back to America in the form of purchases of our exports. It must do so, otherwise, the Middle East would be giving us oil and asking for nothing in return!

The purchase of foreign oil does not entail the loss of wealth, but a gain in wealth. We are able to purchase oil cheaper than we could otherwise purchase it, and those dollars used to purchase the oil come back to the U.S. in the form of exports.

Thursday, January 22, 2009

I would add that editors should not describe why they reject work in their rejection letters. Except in rare cases, they always say something that is nonsensical and/or reveals they know little about the paper.

I think editors usually don't know exactly why they reject a manuscript; they cannot accept them all. They then feel like they have to base their decision off of some logic, so they seek for that logic, but do it quickly--and consequently, poorly.

Tuesday, January 20, 2009

Today in class I administered a Tullock auction (read this and this for info on the Tullock auction). The auction was for $20 and I received a total of $8.01 in bids. This implies that if the auction were a government program, the government would have destroyed at least $8.01 by spending $20.

Friday, January 16, 2009

Governments have tried a variety of methods for allocating water. A teacher can easily analyze these methods using introductory economic tools, and the recent podcast "Zetland Says Bottled.." at Bloomberg on the Economy describes these issues, and is an interesting listen.

Thursday, January 15, 2009

Hold an auction, and do it for real. Auction off a $20 dollar bill, but don't use the normal english auction. The rules of this auction (I have never heard of a name for the auction--I found out later it is called a Tullock Auction) is as follows.

(1) each student submits a sealed bid

(2) they might as well include their money with the bid, because they pay their bid regardless of whether they win

(3) the student with the highest bid wins the $20 bid

(4) I repeat, everyone loses their bid, regardless of whether they win

(5) After the auction, shred the money in front of everyone

Potential Twist: Require each student to bid a minimum amount, say $1

They will enjoy this auction, and you may get bids greater than $20, depending on whether you use the twist or not. More importantly, the auction will teach them the social consequences of rent-seeking. Our government is currently doling out billions in bailout funds and stimulus packages. To obtain this "free money", one must hire lobbyists to lobby for the money, and lobbyists are not cheap.

This is how lobbying for free political money works: you hire lobbyists to fight for the money, and if you spend the most lobbying money you get the money, otherwise you do not receive the money. Either way, you still have to pay your lobbyists. So rent-seeking is just like the auction described above.

What is important to note is that it is very easy for the number of dollars seeking the free money to exceed the amount of free money, creating a loss for society. In many government programs to provide housing assistance, they do (see EconTalk.org, June 23, 2006). If I auction off twenty dollars and students in total pay $50, and if I burn the $50, society losses $30 in value. And money given to lobbyists really is like burning money for society as a whole. We take smart, valuable people who could be producing beneficial goods and services, and have them rent-seek instead.

Where Goodness Lies: An Open Letter to Students

By Judith Cone, Vice President for Emerging Strategies at theEwing Marion Kauffman Foundation:"The world is hungry for what we often take for granted. I have been invited to visit countries around the world to speak with leaders on how to promote entrepreneurship as a way to create opportunity and hope for their young people. These leaders clearly understand that entrepreneurs create the net new jobs by bringing innovative products and services to customers. I experience the hunger in the world for the privilege of creating jobs through entrepreneurship, and then I return to the United States, where I see something that troubles me. Some students and professors reject business as a morally responsible way to spend one's life. The issue I have is not that some people would rather work in the public sector (government) or the social sector (nonprofit work), but that they assign a higher moral calling to these two sectors than to the private sector (business).

As a college student, you are attempting to gain the knowledge, skills, networks, and inspiration to live a happy, productive, and meaningful life. I like to think of each of you as one unit of creative potential. Looking at it this way means that faculty members are more than dispensers of knowledge. They are guides along your journey, teaching the subjects, passing along beliefs and biases, hopefully inspiring you, and challenging you, to consider the types of people you will become.

Some professors attempt to influence you toward those biases. Some think dismissively of business, for instance, as if society would be better off without it, or they assign pernicious motivations to those who lead businesses. Throughout history, social experiments to this end have failed. Every day, these professors use and benefit from the products and services of business: Google, bookstores, clothing, transportation, and the local coffee shop. They fail to differentiate between business leaders and dismiss the whole sector as greedy, uncaring, and destructive. Yet, even with much evidence of greed and wrongdoing in the public and social sectors, that same categorical condemnation is not present.

In fact, you can make a vital contribution in any of the three sectors, because all three are needed for a society to function well. If just one sector is weak or absent, the result is usually a failed state. Think of the former communist states that tried doing away with private business, or the chaotic warlord states without effective government.

More to the point, in each sector there are models of virtue and there are scoundrels. Goodness has nothing to do with the sector. Where goodness lies is in the heart of the individual, and the choices that matter are the moral choices made in conducting the work. Morality, ethics, and the ability to make the world a better place are not the domain of any one sector. It is individuals, and how they conduct themselves in the world, that matter. As you complete your college work, I hope you will take at least one course in entrepreneurship to learn how to translate your creative ideas into enterprises that create value for society. I hope you remember the many young people around the world who seek the opportunities afforded by entrepreneurship. And, I hope your story is told one day as an example of how you placed opportunity and choice in the hands of others. I hope people know through your actions that you used your unit of potential for good---whether in the private, public, or social sector."

Tuesday, January 13, 2009

On the first day of class it is important to articulate why your class is important. Students want to hear specific examples of how their class will benefit them. Here is what I plan to say for my junior level agricultural economics class.

(1) The picture to the right shows a recent Wall Street Journal article titled, "Feeling Flush,...". A paragraph underneath the title discusses how, months ago when oil prices were unusually high, the CEO of Exxon believed that they were too high and would soon come down. He was right, and consequently, Exxon made tremendous amounts of money. The purpose of this class is to help you the student better understand how and why prices change across time, so that when you become a CEO of a major company, you will make the "right" call just as this CEO did. And don't think the oil industry is irrelevant to your major; energy companies love ag econ students because oil markets behave much like agricultural markets.

(2) The second WSJ article has the title, "Deal Spreads...". In the sub-title it says the phrase, "merger arbitragers show more caution." Do you know what an arbitrager is? We cover such terms in this class. Another purpose of this class is to give you the knowledge to read sophisticated articles such as this one. While we largely study agricultural issues, the fundamental concepts are easily transferred to subjects such as mergers. In fact, for every agricultural topic we discuss, we will discuss a non-ag topic.

(3) Finally there is the Feedstuffs article titled, "Reports of rapid sow liquidation premature...". When an employer hires an ag-business student they expect the graduate to be able to understand not only the title but the entire article. After this class, you will indeed understand this article title and the article content. This is not because I think you will be a hog farmer, but because there is a significant change you will work in an area where you must understand some market. Perhaps you will work for Albertsons grocery store, in charge of tracking pork prices and determining when and what purchases to make. In this case, though you will never visit a hog farm, you must understand the hog market, and must be able to read this article.

Monday, January 12, 2009

A retired meat industry executive said there are very few situations in which he would advise producers to get into the meat packing business. Most cooperatives ultimately fail because of flawed business models and marketing plans. Only six months after beginning operations, Majestic Food Group, a pork processing company owned by 120 Iowa hog producers, ceased operations in spring 2005 when the cooperative was unable to repay a $1.6 million loan.

Feedstuffs, Jan 5, 2009

Of Meadowbrook's 210 original producer-owners, only around half remain. After five years of delivering hogs for less than fair market value and no dividends, many of the producers are opting out.

Feedstuffs, Dec 22, 2008

Farmers consistently believe that just believe a packer makes "profits" by purchasing their animals and turning those live animals into wholesale meat, that the farmers can create a meat processing cooperative and channel those profits back to the farmer. This is due to a flawed understanding of what profits represent. A packer makes money by creating a spectacular business model. Unless you know you have that business model or a better one, why would you think you could also make similar profits?

Portland Public Schools have recently been feeding children local ground beef which they purchase at $44.85 per packet of 75 patties, when they could import beef from other parts of the U.S. for $17.11 per packet of 140 patties. After doing a taste test among the children for the beef types, they decided the students could not detect a difference (Source: Feedstuffs Foodlink, Jan 12, 2008).

But taste has nothing to do with the locovore movement. Locovores are under the false pretense that local food is good for the local economy. Cutting off trade with other nations is bad for the U.S. Oregon cutting off all trade with other states is bad for Oregon. The town of Smithville is made poorer by not buying and selling goods with other towns. Bailey Norwood is made worse off trying to produce all the goods he consumes.

But important people adhere to this insane movement. Read my entry on locovore Michael Pollan here.

An auction for 56 foreclosed properties in Utah fell through when the owners rejected the bids. Auctioneer Eric Nelson says the banks and private lenders who owned the properties decided to wait and see if they might get a better offer from the federal government.

--Reason Magazine, February, 2009, page 9

I don't doubt that this same type of uncertainty is keeping banks holding onto "toxic assets", freezing propensity to trade, and prolonging the recession.

Friday, January 9, 2009

How can one lead a successful college career, that leads to a successful job hunt? The best way to demonstrate is through stories of actual students. A profile of one of my favorite students is as follows, with her name protected.

This young lady entered college like most students, having no idea what she wanted to do in life. She entered the Department of Agricultural Economics, and soon made many friends and did well in school. She considered going into finance, human resources, even marriage counseling. After visiting a graduate school in marriage counseling and realizing it wasn't "her thing", she settled on an agribusiness degree with a finance and a human resources management minor.

During her junior year, she decided she should try and get an internship, but where do you look? It is easy, she says, just go to the HireOSUGrads.com program and start searching. In fact, it seems most students find their internships and jobs through this program. The young lady featured in this posting stresses the importance of really searching through the database of employers and jobs. Don't settle for a quick scan.

She ended up taking an internship with Conoco Phillips, and made sure she gave 100% every day. Conoco Phillips was impressed with her diligence, and just weeks after her internship ended they offerred her a job. She thoroughly enjoyed her internship; the challenges it allowed her to overcome helped give her life purpose and she enjoyed the people at Conoco. So she took the job.

To protect the hiring practices of Conoco Phillips, I will not tell you the offer she received, but it is probably the best offer I have ever seen an undergraduate receive. It didn't surprise me she got such a good offer though, this young lady is remarkable, and the internship allowed her to demonstrate her work ethic to Conoco.

She had other accomplishments of course: high grades, awards, and officer positions in student organizations. However, it was ultimately the internship, and her performance in the internship, that got her the job. Also, she ran operated a private business of boarding and breeding a certain breed of dog. That experience with business perked their interest in this student. I once asked her what item about her transcript or resume they showed the most interest in discussing, and it was this private dog business.

I have conducted surveys of thousands of employers and they consistently tell me that an internship is more important than high grades, awards, and officer positions in clubs. The most important accomplishment to obtain in college is an undergrad -- without a doubt. Moreover, when you get the internship, work your ass off and make friends, because it will establish your reputation and follow you the rest of your life.

After the Stock Market Crash of 1929, government made sure this downturn would become a depression. In May-June of 1929 Congress attempted to increase farm incomes by enacting tariffs on agricultural commodities. There was a surplus of crops everywhere, including Europe which had recently recovered its agricultural potential from World War I. Much of these crops entered the U.S. as imports, helping to hold U.S. crop prices low. So by applying tariffs to these imports and making them expensive, buyers would turn to U.S. crops, bidding up the price of farm commodities, and increasing farm incomes.

However, other industries were not about to let agriculture benefit alone. Scores of industry representatives testified in Congressional hearings that they too needed protection from foreign competition. When these hearings finally ended, there were 20,000 pages of testimony. Hoover signed the Smoot-Hawley tariff on June 17, 1930, raising the price of imports by an average of 59% for over 25,000 different goods. Predictably, other governments enacted their own trade barriers in retaliation. As the world retreated into protectionism and isolation, wealth rotted. Next to the bank runs, the Smoot-Hawley tariff was the largest factor leading to the Great Depression and all the misery it caused.

Today we have our own financial problems. How are we responding? The Wall Street Journal recently reports, "The U.S. steel industry has now joined autos and ethanol in the conga line to Capitol Hill. Sort of. Steelmakers aren't seeking government bailout money -- a la Detroit and Wall Street -- but they are pressuring President-elect Obama and the new Congress to stack any stimulus proposal in favor of domestic producers, even though that would inevitably come at the expense of the nation's overall economic health."

Thursday, January 8, 2009

Carol Cook is an undergraduate who conducted a research project where she personally interviewed over 40 students individually, asking them what they believe makes for a great teacher. Specifically, she used a laddering interviewing technique that (1) identifies what attributes makes for a great teacher and (2) why those attributes are important to the student.

Today at Oklahoma State University she gave a spectacular seminar on the results of her interviews. If you want to become a great teacher, view this video of the seminar to learn how!

BTW: I have written eight blog entries in a series about the research, the first entry being here.

BTW, again: You may see that a scene jump to another scene abruptly. Parts of the video were edited out for reasons I choose not to say.

Congratulations to Katy Brookman (right) for winning the 2008 Feedstuffs Scholar Award! This award is given to the student who publishes the most outstanding article in Feedstuffs Companion. Katy performed a spectacular empirical analysis of grocery store steak prices, and communicated the results superbly in her paper.

Please visit the Feedstuffs Companion homepage and view other recently published articles by outstanding undergraduate students.

The runner up to the Feedstuffs Scholar Award was Carol Cook's description of the effectiveness of market advisory services.

Economists often argue against greater government involvement in health care, claiming that whenever government interferes with the market allocation of goods and services, rationing will result. Indeed, such an argument was recently posted in a Wall Street Journal editorial.

The editorial (it was this week, though I don't know the date) received several responses arguing that the market also rations health care by price, so rationing is inevitable.

What an excellent topic to discuss in an intro class! What is the difference between rationing by price or rationing by government? One answer is that rationing by government will usually result in less health care.

When markets determining health care, the price determines how much health care is provided and who receives the care. Health care is determined by mutual, voluntary transactions between buyer and seller. Once government becomes involved and alters this price, one of two things can happen. If government serves to raise the price (unlikely) then consumers are less enthusiastic about receiving health care, and the level of health care drops. If government serves to lower the price (unlikely), sellers are less enthusiastic about providing health care, and health care drops.

It is true that price rations health care. But anytime government seeks to take over this rationing duty by raising or lower the health care price, the amount of health care provided will be lowered.

I personally believe this is not the correct way of viewing U.S. health care. We already have a socialist health care system, and there is no chance it will ever become capitalistic. Since we already are socialists in our health care, we might as well be good socialists! Maybe Obama will make us better socialists than Bush was?

If you are like me, you love to hear information about specific people and specific institutions performing specific actions that led to the current financial crisis. I don't want to hear about the industry or the Fed in general, I want to hear about specific people.

Wednesday, January 7, 2009

Many of my exceptionally bright students have no idea what they want to do in life, and seek my consult. The first thing I do is to tell them that it is okay, most students don't. Many people go through their entire lives not knowing exactly what they want to do. Happiness in the job is as much about who you work with than your particular occupation.

Yet, when it comes to careers, I consistently recommend my students who are good with numbers to look into becoming an actuary (you know, people who come up with insurance premiums, things like that). It is challenging, utilizes what they learned in school, pays well, and provides them with some degree of autonomy because they are a professional.

Just recently, the Wall Street Journal published a list of the Best and Worst Occupations in the U.S. -- an actuary was the 2nd best job, as shown below. An economist was #11.

A number of Masonists and economists at the CATO Institute (both of which I read and listen to daily, with profound respect) has attacked the fiscal stimulus plan. The rightly point out that many people think that the extra government spending is "new money" when it fact every dollar put into the economy as part of the stimulus package will be paid for by a dollar taken out of the economy through government borrowing (or if the government raised taxes to pay for the extra spending, taxes would rise by one dollar).

The Masonists and Cato folks make it sound like it is impossible for the stimulus to be a stimulus. If you take out one gallon of water from a bucket, and pour that water back into the bucket, nothing has changed. If you take a dollar out of the economy and then put it back in, nothing has changed.

It can change the economy though, as Hal Varian points out. In an ideal world, the increased savings would be translated instantaneously into higher private investment (using banks as intermediaries). However, in recessions, and especially the Great Depression, these savings tend to accumulate as cash and not used in any fashion by the economy. This is akin to taking wealth out of an economy. When the government induces people to buy government securities instead of accumulating cash, and using that money to provide public goods, the stimulus can work.

Not that I'm for the stimulus package. I don't think we need it. The Bootleggers and Baptists effect will ensure most of it is a deadweight loss. Besides, printing money is better, and Bernanke knows how to do that. So let him.

Let's be honest about the economics of the stimulus package though. Economic theory does contend that it can have a positive effect, and in recessions, generally will.

To understand what attributes students believe that great teachers possess, CASNR undergraduate Carol Cook sat down with 50 undergraduate students individually and conducted a 30-minute interview. The interview was designed to identify the attributes that comprise a great teacher, and why those attributes are important to the student.

We can all learn from Carol's interviews how to become better teachers. The interview technique used mimics methods that companies such as Coke and Honda use to understand what type of product their consumers desire.

Monday, January 5, 2009

The chickens of California are the latest victims of Paul Shapiro and the Humane Society of the U.S Factory Farming Campaign.

It is cruel to subject chickens to the less humane and substandard conditions the so-call animal rights people want.

Hens die 2 to 3 times as fast under the cage-free conditions championed by the so-called animal rights people. This is a proven fact, and gathered data provides this. What looks good to humans does not work as well for chickens. Safety pens (cages) protect hens from killing one another, eating their own feces, big temperature changes and diseases caused by lack of protection other systems fail to provide.

We quit using the systems wanted by the so-called animal rights people when we found that cages worked better for the hens. This was 40-50 years ago. We recently tried these systems again and they still don't work as well as cages for hens.

Only those that are clueless, those that have been lied to or those who are misguided about hen welfare want to ban cages. Knowledgeable and caring people want to keep hens in cages until a better system is found because having hens in cages is the right thing to do for the chickens.

It does seem to be true that cage-free eggs as we produce it in the U.S. is no better than caged eggs. However, there are cage-free methods that provide higher standards of care. These better methods are costly, which is why no one uses them.

Over the holidays I penned an essay articulating the history of humans and their livestock, with emphasis on its relation to animal welfare. While still in the final editing stage, you may read it here. Comments are welcome.